<PAGE>
MITCHELL HUTCHINS SERIES TRUST--HIGH INCOME PORTFOLIO ANNUAL REPORT
February 16, 1999
Dear Contract Owner,
We are pleased to present you with the first annual report for the Mitchell
Hutchins Series Trust--High Income Portfolio, covering the period from
commencement of operations on September 28, 1998 through December 31, 1998.
MARKET REVIEW
- ----------------------------------------------------------------------------
[BARS ICON]
The "flight to quality" that had dominated the bond markets in 1998 partially
reversed itself toward year-end as the markets stabilized. To head off a
threatening global financial crisis, the Federal Reserve cut the short-term
interest rate by 0.25% in September, October and November, lowering it from
5.50% to 4.75%. Cuts in short-term rates by several European central banks in
preparation for the January 1, 1999 debut of the euro currency reinforced the
Federal Reserve action.
After eight weeks of a nearly dead new-issue market (late August through
mid-October), signs of life began to appear in shorter-maturity debt, and
selling longer maturities became possible in issues and sectors perceived to be
less risky. Investors returned to the capital markets in search of bargains,
boosting the corporate and mortgage-backed sectors. In August, corporate bonds
had posted their worst monthly return since 1973; in November they posted their
best monthly return for the same period.
OUTLOOK
[ARROW ICON]
Fixed income investors will most likely take their 1998 experience with risk to
heart and invest cautiously in 1999. Despite continuing strong U.S. economic
growth and the stock market's record levels, spreads and liquidity premiums in
fixed income securities remain high. Yield spreads may tighten a bit in 1999,
which we believe will boost the performance of corporate bonds and mortgage
securities.
Bond market liquidity has improved but may worsen again if one or more
potential problems arise: Brazil's economic condition deteriorates further, the
U.S. stock market weakens or Asia's crisis spreads further. We expect the
economy to grow more slowly in 1999, with inflation remaining low. We do not
believe a recession is likely.
PORTFOLIO REVIEW
- ----------------------------------------------------------------------------
The Portfolio commenced operations on September 28, 1998, very near the low
point of the high-yield market slump. As a result, we were able to construct the
Portfolio at what we believe were bargain prices. As the market began to recover
the Portfolio benefited. The Portfolio's
1
<PAGE>
ANNUAL REPORT
overweighting in communications (21.7%)(1) helped it as that sector outperformed
the rest of the high-yield market for the period. The Portfolio returned 5.16%
for the three months ended December 31, 1998, outperforming the 2.74% return of
its benchmark, the CS First Boston High Yield Index.
We expect the high-yield sector to improve over the next six months. Spreads
to Treasury securities are still much wider than they were at the start of 1998,
and well above their historical average of 491 basis points. (A basis point
equals 1/100th of one percent.) We think spreads could tighten over the next few
months on the strength of new year buying as investors rebalance portfolios.
Since the risk premium for smaller issues has increased, security selection
will become even more important than it was in 1998. The recent rally in the
high-yield market has focused on an extremely narrow subset of only 77 larger
issues out of more than 2,500. We believe that the rally will broaden in 1999
and include smaller issues.
TOP FIVE SECTORS(1)
<TABLE>
<S> <C>
- -----------------------------------
Communications 21.7%
Consumer Manufacturing 13.3
General Industrial 9.9
Transportation 8.7
Cable 5.7
- -----------------------------------
</TABLE>
Our ultimate objective in managing your investments is to help you
successfully meet your financial goals. We thank you for your continued support
and welcome any comments or questions you may have.
Sincerely,
/s/ Margo Alexander
MARGO ALEXANDER
President
Mitchell Hutchins Asset Management Inc.
(1) All weightings represent percentages of portfolio assets as of December 31,
1998. The Portfolio is actively managed and all weightings are subject to
change.
2
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--HIGH INCOME PORTFOLIO ANNUAL REPORT
PERFORMANCE AT A GLANCE
- ----------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE HIGH INCOME
PORTFOLIO AND THE CS FIRST BOSTON HIGH YIELD INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
HIGH INCOME PORTFOLIO CS FIRST BOSTON HIGH YIELD INDEX
<S> <C> <C>
09/30/98 $10,000 $10,000
10/31/98 $10,083 $9,801
11/30/98 $10,608 $10,298
12/31/98 $10,516 $10,274
</TABLE>
The graph depicts the performance of the High Income Portfolio versus the CS
First Boston High Yield Index, from September 30 through December 31, 1998. It
is important to note that the High Income Portfolio is a professionally managed
mutual fund while the Index is not available for investment and is unmanaged.
The comparison is shown for illustrative purposes only.
TOTAL RETURN, PERIOD ENDED 12/31/98
<TABLE>
<S> <C>
- -----------------------
Life* 5.16%
- -----------------------
</TABLE>
* Life = return since commencement of operations on 09/28/98.
Past performance does not guarantee future performance. Figures assume
reinvestment of all dividends and capital gain distributions, if any, at net
asset value on the payable dates and do not include sales charges. Performance
relates to the Portfolio and does not reflect separate account charges
applicable to variable annuity contracts.
The return and principal value of an investment will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their original
cost.
Sources: Lipper Inc. and PaineWebber Inc.
3
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--HIGH INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- ------------- -------------------- ----------------- -------------
<C> <S> <C> <C> <C>
CORPORATE BONDS--97.53%
AEROSPACE--2.04%
$ 250 Sabreliner Corporation**...... 06/15/08 11.000% $ 222,500
-------------
AIRLINES--1.20%
125 Airplanes Pass-Through
Trust....................... 03/15/19 10.875 131,250
-------------
CABLE--5.67%
250 @Entertainment Incorporated... 07/15/08 14.500+ 110,000
125 NTL Incorporated.............. 02/15/07 10.000 127,500
250 RCN Corporation............... 10/15/07 11.125+ 145,000
250 21st Century Telecom Group
Incorporated................ 02/15/08 12.250+ 105,000
250 UIH Australia/Pacific
Incorporated................ 05/15/06 14.000+ 132,500
-------------
620,000
-------------
COMMUNICATIONS-FIXED--18.00%
125 Allegiance Telecom
Incorporated................ 05/15/08 12.875 122,500
250 Barak ITC..................... 11/15/07 12.500+ 127,500
250 Call-Net Enterprises
Incorporated................ 08/15/08 8.000 237,500
250 Flag Limited.................. 01/30/08 8.250 245,000
125 Global Crossing Holdings
Limited..................... 05/15/08 9.625 131,250
125 GST Equipment Funding
Incorporated................ 05/01/07 13.250 123,125
250 Metromedia Fiber Network
Incorporated**.............. 11/15/08 10.000 256,250
250 MetroNet Communications
Corporation................. 06/15/08 9.950+ 150,000
125 Northeast Optic Network
Incorporated................ 08/15/08 12.750 122,500
250 Pathnet Incorporated.......... 04/15/08 12.250 175,000
125 Time Warner Telecom........... 07/15/08 9.750 130,625
250 Viatel Incorporated........... 04/15/08 12.500+ 146,250
-------------
1,967,500
-------------
COMMUNICATIONS-MOBILE--3.68%
250 Nextel Communications
Incorporated................ 02/15/08 9.950+ 150,000
250 Orange PLC.................... 08/01/08 8.000 252,500
-------------
402,500
-------------
CONSUMER MANUFACTURING--13.27%
250 AAI Fostergrant
Incorporated................ 07/15/06 10.750 222,500
125 Cluett American Corporation... 05/15/08 10.125 118,125
250 Decora Industries
Incorporated................ 05/01/05 11.000 225,000
125 J. Crew Operating
Corporation................. 10/15/07 10.375 106,250
250 Phillips Van-Heusen
Corporation................. 05/01/08 9.500 250,000
250 Protection One
Incorporated**.............. 01/15/09 8.125 250,625
275 Westpoint Stevens
Incorporated................ 06/15/08 7.875 278,438
-------------
1,450,938
-------------
ENERGY--4.37%
250 GulfMark Offshore
Incorporated................ 06/01/08 8.750 227,500
</TABLE>
4
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--HIGH INCOME PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- ------------- -------------------- ----------------- -------------
<C> <S> <C> <C> <C>
</TABLE>
CORPORATE BONDS (CONTINUED)
ENERGY (CONCLUDED)
<TABLE>
<C> <S> <C> <C> <C>
$ 250 R&B Falcon Corporation**...... 12/15/08 9.500% $ 250,000
-------------
477,500
-------------
FINANCE--1.90%
250 Signet Capital Trust I........ 08/15/27 9.500 207,500
-------------
FOOD & BEVERAGE--1.14%
125 Packaged Ice Incorporated..... 02/01/05 9.750 125,000
-------------
GAMING--1.17%
125 Circus Circus Enterprises
Incorporated................ 12/01/05 9.250 127,500
-------------
GENERAL INDUSTRIAL--9.87%
250 Allied Waste Industries
Incorporated**.............. 01/01/06 7.625 251,875
250 Coltec Industries
Incorporated................ 04/15/08 7.500 265,000
125 Goss Graphic Systems
Incorporated................ 10/15/06 12.000 68,750
125 Jordan Telecommunication
Products.................... 08/01/07 9.875 125,000
250 Premier Graphics
Incorporated**.............. 12/01/05 11.500 248,750
125 Roller Bearing Company of
America Incorporated........ 06/15/07 9.625 120,000
-------------
1,079,375
-------------
HEALTHCARE--4.58%
125 Fresenius Medical Care Capital
Trust....................... 02/01/08 7.875 123,750
125 InSight Health Services
Corporation................. 06/15/08 9.625 121,250
250 Tenet Healthcare
Corporation**............... 12/01/08 8.125 256,250
-------------
501,250
-------------
HOTELS & LODGING--2.57%
175 HMH Properties Incorporated... 12/01/08 8.450 175,000
125 Silverleaf Resorts
Incorporated................ 04/01/08 10.500 106,250
-------------
281,250
-------------
MEDIA--2.26%
250 Fox Family Worldwide
Incorporated................ 11/01/07 9.250 247,500
-------------
REAL ESTATE--4.57%
250 D.R. Horton Incorporated...... 06/15/04 8.375 250,000
250 Forest City Enterprise
Incorporated................ 03/15/08 8.500 250,000
-------------
500,000
-------------
RESTAURANTS--2.06%
250 American Restaurant Group
Incorporated................ 02/15/03 11.500 225,000
-------------
RETAIL--2.24%
250 Tuesday Morning Corporation... 12/15/07 11.000 245,000
-------------
</TABLE>
5
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--HIGH INCOME PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- ------------- -------------------- ----------------- -------------
<C> <S> <C> <C> <C>
</TABLE>
CORPORATE BONDS (CONCLUDED)
<TABLE>
<C> <S> <C> <C> <C>
SUPERMARKETS & DRUGSTORES--1.19%
$ 125 The Pantry Incorporated....... 10/15/07 10.250% $ 130,000
-------------
TECHNOLOGY--4.62%
125 Fairchild Semiconductor
Corporation................. 03/15/07 10.125 125,000
250 PSINet Incorporated........... 02/15/05 10.000 245,000
125 Verio Incorporated............ 06/15/04 13.500 135,000
-------------
505,000
-------------
TRANSPORTATION NON-AIR--8.70%
250 American Reefer Company
Limited..................... 03/01/08 10.250 157,500
125 Atlantic Express
Transportation
Corporation................. 02/01/04 10.750 126,250
215 Eletson Holdings
Incorporated................ 11/15/03 9.250 203,175
250 HDA Parts Systems
Incorporated**.............. 08/01/05 12.000 225,000
250 Stena AB...................... 06/15/07 8.750 239,375
-------------
951,300
-------------
UTILITIES--2.43%
250 CalEnergy Company
Incorporated................ 09/15/08 7.520 265,312
-------------
Total Corporate Bonds (cost--$10,350,363)...... 10,663,175
-------------
CONVERTIBLE BONDS--1.12%
GAMING--1.12%
125 Argosy Gaming Corporation
(cost--$113,284)............ 06/01/01 12.000 122,969
-------------
<CAPTION>
NUMBER OF
WARRANTS
- -------------
<C> <S> <C> <C> <C>
WARRANTS(A)--0.00%
CABLE--0.00%
1,000 @Entertainment Incorporated
(cost--$10)................. 10
-------------
<CAPTION>
PRINCIPAL
AMOUNT
(000)
- -------------
<C> <S> <C> <C> <C>
REPURCHASE AGREEMENT--1.33%
$ 145 Repurchase agreement dated
12/31/98 with State Street
Bank and Trust Company,
collateralized by $143,367
U.S. Treasury Notes, 6.000%,
due 08/15/99
(value--$148,026); proceeds:
$145,064 (cost--$145,000)... 01/04/99 4.000 145,000
-------------
Total Investments
(cost--$10,608,657)--99.98%.................. 10,931,154
Other assets in excess of liabilities--0.02%... 1,692
-------------
Net Assets--100.00%............................ $ 10,932,846
-------------
-------------
</TABLE>
- -----------------
+ Denotes a step up bond or zero coupon bond that converts to the noted fixed
rate at a designated future date.
** Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
(a) Non-income producing security
See accompanying notes to financial statements
6
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--HIGH INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS
Investments, at value (cost--$10,608,657)............................................................. $10,931,154
Cash.................................................................................................. 2,755
Interest receivable................................................................................... 205,675
Other assets.......................................................................................... 229
-----------
Total assets.......................................................................................... 11,139,813
-----------
LIABILITIES
Dividends payable..................................................................................... 193,551
Payable to investment adviser and administrator....................................................... 4,677
Accrued expenses and other liabilities................................................................ 8,739
-----------
Total liabilities..................................................................................... 206,967
-----------
NET ASSETS
Beneficial interest shares of $0.001 par value outstanding--881,780; (unlimited amount authorized).... 10,610,568
Distributions in excess of net investment income...................................................... (93)
Distributions in excess of net realized gain from investment transactions............................. (126)
Net unrealized appreciation of investments............................................................ 322,497
-----------
Net assets............................................................................................ $10,932,846
-----------
-----------
Net asset value, offering price and redemption value per share........................................ $12.40
-----------
-----------
</TABLE>
See accompanying notes to financial statements
7
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--HIGH INCOME PORTFOLIO
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE PERIOD
SEPTEMBER 28, 1998+
THROUGH
DECEMBER 31, 1998
--------------------
<S> <C>
INVESTMENT INCOME:
Interest..................................................................................................... $ 202,088
----------
EXPENSES:
Investment advisory and administration....................................................................... 12,017
Legal and audit.............................................................................................. 8,664
Trustees' fees............................................................................................... 3,750
Custody and accounting....................................................................................... 1,442
Reports and notices to shareholders.......................................................................... 1,253
Transfer agency fees and related service expenses............................................................ 500
Other expenses............................................................................................... 1,726
----------
29,352
----------
Net investment income........................................................................................ 172,736
----------
REALIZED AND UNREALIZED GAINS FROM INVESTMENTS:
Net realized gains from investments.......................................................................... 20,596
Net change in unrealized appreciation/depreciation of investments............................................ 322,497
----------
NET REALIZED AND UNREALIZED GAINS FROM INVESTMENT TRANSACTIONS............................................... 343,093
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS......................................................... $ 515,829
----------
----------
</TABLE>
- ---------------
+ Commencement of operations
See accompanying notes to financial statements
8
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--HIGH INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
SEPTEMBER 28, 1998+
THROUGH
DECEMBER 31, 1998
-------------------
<S> <C>
FROM OPERATIONS:
Net investment income......................................................................................... $ 172,736
Net realized gain from investments............................................................................ 20,596
Net change in unrealized appreciation/depreciation of investments............................................. 322,497
-------------------
Net increase in net assets resulting from operations.......................................................... 515,829
-------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income......................................................................................... (172,829)
Net realized gains from investment transactions............................................................... (20,722)
-------------------
Total dividends and distributions to shareholders............................................................. (193,551)
-------------------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares.......................................................................... 10,610,658
Cost of shares repurchased.................................................................................... (90)
-------------------
Net increase in net assets from beneficial interest transactions.............................................. 10,610,568
-------------------
Net increase in net assets.................................................................................... 10,932,846
NET ASSETS:
Beginning of period........................................................................................... --
-------------------
End of period................................................................................................. $ 10,932,846
-------------------
-------------------
</TABLE>
- -------------
+ Commencement of operations
See accompanying notes to financial statements
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Mitchell Hutchins Series Trust--High Income (the "Portfolio") is a diversified
Portfolio of Mitchell Hutchins Series Trust (the "Fund") which is organized
under Massachusetts law by a Declaration of Trust dated November 21, 1986 and is
registered with the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The Fund operates as a series company currently offering thirteen Portfolios.
Shares of each Portfolio are offered only to insurance company separate accounts
which fund certain variable contracts.
The Fund accounts separately for the assets, liabilities and operations for
each Portfolio. Expenses directly attributable to each Portfolio are charged to
that Portfolio's operations; expenses which are applicable to all Portfolios are
allocated among them in a pro rated basis. Prior to the commencement of
operations on September 28, 1998, the Portfolio had no activity other than the
sale of one share for a total amount of $12 to Mitchell Hutchins Asset
Management, Inc. ("Mitchell Hutchins") a wholly owned asset management
subsidiary of PaineWebber Incorporated ("PaineWebber") and investment adviser
and administrator of the Portfolio.
The preparation of financial statements in accordance with generally accepted
accounting principles requires the Fund's management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates. The following is a
summary of significant accounting policies:
VALUATION OF INVESTMENTS--Securities that are listed on U.S. and foreign stock
exchanges are valued at the last sale price on the day the securities are being
valued or, lacking any sales on such day, at the last available bid price. In
cases where securities are traded on more than one exchange, the securities are
generally valued on the exchange designated by Mitchell Hutchins, as the primary
market. Securities traded in the over-the-counter ("OTC") market and listed on
The Nasdaq Stock Market, Inc. ("Nasdaq") are valued at the last available sale
price, or last bid price available if no sale occurs, on Nasdaq prior to the
time of valuation; other OTC securities (other than short-term debt securities
described below) are valued at the last available bid price prior to the time of
valuation. When market quotations are unavailable, securities are valued based
upon appraisals received from a pricing service using a computerized matrix
system or appraisals derived from information concerning the security or similar
securities received from recognized dealers in those securities. The amortized
cost method of valuation, which approximates market value, is used to value
short-term debt obligations with sixty days or less remaining to maturity,
unless the Fund's board of trustees determines that this does not represent fair
value. Securities and assets for which market quotations are not readily
available (including restricted securities subject to limitations as to their
sale) are valued at fair value as determined in good faith by or under the
direction of the Fund's board of trustees.
REPURCHASE AGREEMENTS--The Portfolio's custodian takes possession of the
collateral pledged for investments in repurchase agreements. The underlying
collateral is valued daily on a mark-to-market basis to ensure that the value,
including accrued interest, is at least equal to the repurchase price. In the
event of default of the obligation to repurchase, the Portfolio has the right to
liquidate the collateral and apply the proceeds in satisfaction of the
obligation. Under certain circumstances, in the event of default or bankruptcy
by the other party to the agreement, realization and/ or retention of the
collateral may be subject to legal proceedings. The Portfolio may participate in
joint repurchase agreement transactions with other funds managed by Mitchell
Hutchins.
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME--Investment transactions are
recorded on the trade date. Realized gains and losses from investment
transactions are calculated using the identified cost basis. Dividend income and
other distributions are recorded on the ex-dividend date. Interest income is
recorded on an accrual basis. Premiums are amortized and discounts are accreted
as adjustments to interest income and the identified cost of investments.
DIVIDENDS AND DISTRIBUTIONS--Dividends and distributions to shareholders are
recorded on the ex-dividend date. The amount of dividends and distributions are
determined in accordance with federal income tax regulations, which may differ
from generally accepted accounting principles. These "book/tax" differences are
either considered temporary or permanent in nature. To the extent these
differences are permanent in nature, such amounts are reclassified within the
capital accounts based on their federal tax-basis treatment; temporary
differences do not require reclassification.
CONCENTRATION OF RISK
The ability of the issuers of debt securities held by the Portfolio to meet
their obligations may be affected by economic and political developments,
including those particular to a specific industry, country or region.
INVESTMENT ADVISER AND ADMINISTRATOR
The Fund's board of trustees has approved an investment advisory and
administration contract with Mitchell Hutchins, under which Mitchell Hutchins
serves as investment adviser and administrator of the Portfolio. In accordance
with the Advisory Contract, the Portfolio pays Mitchell Hutchins an investment
advisory and administration fee, which is computed daily and payable monthly, at
an annual rate of 0.50% of the Portfolio's average daily net assets.
BANK LINE OF CREDIT
The Portfolio may participate with other funds managed by Mitchell Hutchins in
a $200 million committed credit facility ("Facility") to be utilized for
temporary financing until the settlement of sales or purchases of portfolio
securities, the repurchase or redemption of shares of the Portfolio at the
request of the shareholders and other temporary or emergency purposes. In
connection therewith, the Portfolio has agreed to pay commitment fees, pro rata,
based on the relative asset size of the funds in the Facility. Interest is
charged to the Portfolio at rates based on prevailing market rates in effect at
the time of borrowings. For the period September 28, 1998 (commencement of
operations) through December 31, 1998, the Portfolio did not borrow under the
Facility.
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned at December 31,
1998 was substantially the same as the cost of securities for financial
statement purposes.
At December 31, 1998, the components of net unrealized appreciation of
investments were as follows:
<TABLE>
<S> <C>
Gross appreciation (investments having an excess of value over cost)................ $ 409,559
Gross depreciation (investments having an excess of cost over value)................ (87,062)
-----------
Net unrealized appreciation of investments.......................................... $ 322,497
-----------
-----------
</TABLE>
For the period September 28, 1998 through December 31, 1998, total aggregate
purchases and sales of portfolio securities, excluding short-term securities,
were $11,833,773 and $1,423,062, respectively.
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS
FEDERAL TAX STATUS
The Portfolio intends to distribute all of its taxable income and to comply
with the other requirements of the Internal Revenue Code applicable to regulated
investment companies. Accordingly, no provision for federal income taxes is
required.
SHARES OF BENEFICIAL INTEREST
There are an unlimited amount of $0.001 par value shares of beneficial
interest authorized. Transactions in shares of beneficial interest were as
follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
SEPTEMBER 28,
1998+
THROUGH
DECEMBER 31,
1998
--------------
<S> <C>
Shares sold............................. 881,787
Shares redeemed......................... (7)
-------
Net increase............................ 881,780
-------
-------
</TABLE>
- ---------------
+ Commencement of operations
12
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--HIGH INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the
period is presented below:
<TABLE>
<CAPTION>
FOR THE PERIOD
SEPTEMBER 28,
1998+
THROUGH
DECEMBER 31,
1998
---------------
<S> <C>
Net asset value, beginning of period.............. $ 12.00
-------
Net investment income............................. 0.20
Net realized and unrealized gain from
investments...................................... 0.42
-------
Net increase from investment operations........... 0.62
-------
Dividends from net investment income.............. (0.20)
Distributions from net realized gains from
investments...................................... (0.02)
-------
Total dividends and distributions................. (0.22)
-------
Net asset value, end of period.................... $ 12.40
-------
-------
Total investment return (1)....................... 5.16%
-------
-------
Ratios/Supplemental Data:
Net assets, end of period (000's)................. $ 10,933
Expenses to average net assets.................... 1.20%*
Net investment income to average net assets....... 7.04%*
Portfolio turnover rate........................... 21%
</TABLE>
- -----------------
+ Commencement of operations
* Annualized
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of the period reported, reinvestment of all dividends and other
distributions, if any, at net asset value on the payable dates and a sale at
net asset value on the last day of the period reported. The figures do not
include additional contract level charges; results would be lower if such
charges were included. Total investment return has not been annualized.
13
<PAGE>
MITCHELL HUTCHINS SERIES TRUST--HIGH INCOME PORTFOLIO
REPORT OF INDEPENDENT AUDITORS
The Board of Trustees and Shareholders
Mitchell Hutchins Series Trust--High Income Portfolio
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Mitchell Hutchins Series Trust --
High Income Portfolio (the "Portfolio") (one of the Portfolios constituting
Mitchell Hutchins Series Trust) (the "Fund") as of December 31, 1998 and the
related statement of operations, the statement of changes in net assets and the
financial highlights for the period September 28, 1998 (commencement of
operations) through December 31, 1998. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
investments owned as of December 31, 1998, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Mitchell Hutchins Series Trust -- High Income Portfolio at December 31, 1998,
the results of its operations, the changes in its net assets and the financial
highlights for the period September 28, 1998 through December 31, 1998, in
conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
New York, New York
February 11, 1999
14
<PAGE>
ANNUAL REPORT
MITCHELL
HUTCHINS SERIES
TRUST
HIGH INCOME
PORTFOLIO
DECEMBER 31, 1998
- -C-1999 PaineWebber Incorporated
